Yesterday we have read about how to recover the interest outgo in housing loan by investing 15% of EMI.
Today we are going to discuss on various tax benefits available along with housing loans. What will be the net interest rate after taking tax element into consideration.
Tax Benefits on Housing Loan:
* Principle portion remitted during a financial year is exempted from income up to maximum of Rs 1,50,000/-under Section 80C of income tax act.
* Interest portion remitted during financial year is exempted from income up to maximum of Rs 2,00,000/- under section 24 of income tax act.
So Maximum amount of Rs 3.5 Lakhs can be availed as tax benefits.
Since section 80C accommodates other exemptions like Employee provided fund, Life Insurance, ELSS, PPF. So It is mostly not possible for salaried class to get maximum exemption on principle portion in Housing Loan.
Mr Ram who has availed housing loan of Rs 30,00,000 for 20 years at 8.5% interest rate.
Ram starts paying EMI of Rs 26035 in the month of April. He will remit Rs 312417/- out of which Rs 252710 will be interest portion and Re59707 will be principle portion.
If Ram is in 30% Income tax slab he can save up to Rs 62400 in his taxes. Which works out his net interest rate equivalent to 6.42%
Considering 20% tax slab, He can save up to Rs 41600 and net interest rate will works out at 7.11%
If he is in 5% tax bracket , even he can save maximum of Rs 10400 in tax and net interest rate will be equivalent to 8.15%
#Only Interest portion on hosing loan is taken into account for calculation.
Mentotax recommends to pay your debts regularly and Utilize the tax exemption. Submit declaration to your employer to avoid deduction of TDS by collecting provisional interest certificate from your bank. If you are paying higher interest portion than what you utilize for tax savings mentotax advises to start prepaying it.
#Mentotax #HousingLoan #Investment #Interest
